Powering local economic development: Dr Dlamini Zuma at the 2022 Association of Municipal Electricity Utilities Convention

Thank you for the opportunity to address this 68th Convention for the Association of Municipal Electricity Utilities (AMEU), which you host under the insightful theme of a “Just Energy Transition for South Africa”. 

This gathering is hosted at a time when South Africa has been plunged into darkness with the longest and most rolling blackouts we have ever experienced in our democracy. Indeed, on the one hand demand has increased as we have sought to ensure wall-to-wall energy coverage throughout our country. Villages and townships that had been in the dark for centuries gradually got light and energy.

In 1993 only 36% of households had access to electricity. Today it stands at above 90%. Very few places in the world and on the continent have registered such a rapid pace of electrification at such a relatively short time. Only Egypt (100%), Tunisia (100%), Mauritius (100%), Libya (99,8%), Seychelles (98%), and Cape Verde (96%), currently surpass South Africa’s figures of people with access to electricity. In this regard the challenge we face is now bringing electricity to the close to 6 million South Africans who remain in darkness. We must achieve that goal while having to ensure consistent and reliable energy to those that have access.

With regards to the latter, a study conducted by Afro Barometer, shows that only 5% of South Africans were satisfied in relation to electricity services provided. This study was undertaken in 2016, long before the current rolling blackouts phenomenon, thus it is not only indicative of frequency but also quality of service. I am sure, given our current experiences, the 8th edition of the study, which is to be completed later this year, will have a far more damning picture. For those millions who do not have access or experience energy supply in a sporadic manner the issue is quality and consistent access to energy, by any means possible or necessary.

Certainly, this has been the case even in developed nations in the world, that is why they remain the biggest carbon emitters, it is not only the green they pursue but they remain committed to serving the interest of their people, above all. This has been seen by the return to fossil-based energy in places such as the EU, with the cutting of supply lines from Russia because of heightening hostilities in the Ukraine. Therefore, we must never forget that about 80% of our energy is generated through fossil fuels with coal making about 26% of that. Currently over 80 000 are employed in the coal mining sector and five companies (Anglo Coal, BHP Billiton/ South32/SAEC, Sasol, Exxaro and Xstrata) account for over 80% of coal capacity.

This in itself poses a danger, but more importantly is that the sector lost over 10 000 jobs over the last ten years, partially as result of an overemphasis on the move away from coal to other sources. That overemphasis and loss has particularly affected the economies of four municipalities in Mpumalanga, that of eMalahleni, Steve Tshwete, Govan Mbeki and Msukaligwa, where 76% of all coal workers are employed.

Despite these job losses the level of absorption of the workers in the renewable energy sector has not been good. As the renewable sector requires a slightly higher level of skills and over 81% of coal mine workers have matric or less.

These coal workers therefore make a very small portion of the 28 000 employed in the sector, which incidentally is also 45% of the continent’s renewable energy workforce. We must also take into consideration that our energy demands going forward are likely to double by 2050. Therefore, to mitigate the possibility of a greater energy crisis, rather than disinvesting in coal, we must place greater emphasis on researching and investing on getting cleaner and more efficient coal-based technologies and solutions. Even France and Netherlands which are considered amongst the most energy efficient countries in the world, utilise nuclear and fossils at the core of their energy generation mix.

We have no choice but to find the appropriate energy mix that will give us the most just of transitions. Thankfully in this room, on this platform and beyond, we have the critical minds that can assist us in exploring that critical mix, as well as new and innovative means of producing and consistent energy. For example, I recently came across gravitational energy technologies, that utilise one of the oldest known sources of kinetics, to consistently supply the grids. These could complement the work we have begun on other renewable sources such as biomass, solar, wind and wave technologies, all of which only generates 27% of the world’s energy. Fortunately, virtually all renewable and recyclable energy sources are in abundance in South Africa and Southern Africa, especially in the rural areas.

This presents a new frontier and potential niche, which is a window of opportunity for the country and continent, which we must capitalise on. In exploring that frontier, we have the duty to also find ways to make those alternative energy sources more efficient and affordable. Currently, these energy sources have a relatively lower financial return on investment, as well as, intermittency, high material input, low energy density, short lifetime, and recycling challenges.

In charting the path towards an appropriate energy mix and a just energy supply we require more and not less state. Everywhere in the world, it is the state that drives generation and distribution towards the social goals such as education, rural development, health, and recreation. Take for instance in Tunisia, the State Power Utility Company, STEG, controls 91,7% of the country’s installed power production capacity and produces 84% of the electricity. Even in the most capitalist of countries, it is the state that issues conditional licensing for private generation and distribution, which is tied to social outcomes. Often it is the local state that takes this licensing responsibility, if it does not produce itself.

For instance, despite American penchant for capitalism the most used instruments for distribution are not for profit cooperatives or municipalities, which removes the profit element. These Municipal or community utilities are owned and operated by the local or community bodies to provide a range of services such as water, gas, internet, telephone services, garbage removal and banking.

This is not a new idea. Los Angeles has had a publicly owned utilities company for over 100 years, and 1 in 7 Americans are served by such a utility company. The American Public Power Association, which is your counterpart there, makes a strong case on how “not for profit, community owned locally controlled” utilities provide better services at lower rates than privately owned utilities while also providing jobs and revenue for their local communities.

The Association further says, “residential customers of public power utilities pay monthly bills that are on average 4% less than customers of investors – owned utilities, and 16% less than customers of cooperative utilities”. It goes on to say “public power utilities also deliver more reliable electric service. Outside of major adverse events (e.g., storms), customers of a public power utility are likely to be without power for less time – 62 minutes a year, compared to 150 minutes a year for customers of private utilities.

These Municipal and community utilities are important in powering local economic development, as they can be more responsive to local needs whilst supporting the local revenue base as well as local organisations and businesses. Of course, our problem with regards to ownership in South Africa, is not the private, but the drive to unjustifiably privatise the already uncompetitive, pricey, and monopolistic public entity. Even as the unbundling is being planned, it is planned with private owners in mind, and not with the most logical and more social justice prone municipal and community/cooperative models in mind.

We must therefore pay attention to the specific challenges which have not enabled our municipalities and their entities to position themselves as Independent Power Producers (IPPs). A study recently undertaken by Sustainable Energy Africa, found that only 50% of our municipalities are equipped with any form of Small-Scale Embedded Generation processes. A further 25% do not have the internal capacity to establish or manage these processes, while the remaining 25% are not in a state to handle any additional responsibilities owing to governance and financial challenges. Thus, we should not just theorise and speak of the research, but we must find ways to establish the capacities to develop and maintain the energy infrastructure capabilities of all municipalities.

This association has the duty not just to analyse the state of our infrastructure but needs to roll up sleeves and get to work in solving them. And assisting all of us to understand what needs to be done. Let those municipalities and utilities doing better to support those that are not performing as well. We must be also deliberate and practical in our actions as this association.

Therefore, I wish to challenge the association with assisting the municipalities of OR Tambo, Alfred Nzo, Ugu and Harry Gwala, in Eastern Cape and KZN, to plan and deliver on their energy potential and promises. I choose these localities because this is the site of the newly Gazetted Eastern Seaboard Region which includes a Polycentric African Coastal City.

Already, the President has launched the project last November and there is national steering team which includes all the spheres of governments with 16 Departments and 7 State Owned Entities. I wish to invite the Association to join these planners and implementors as they consider how and when to unlock the close to 5million megawatts potential that can support the city and country.

Programme Director, as we propose the communal and municipal ownership, we must maintain certain national norms and standards which will ensure better education, health, recreational, cultural, and economic outcomes. We must also remember that ours is a unitary state which functions through the cooperation of all spheres and entities of government and collective governance. We must therefore maintain reasonable costs and reliability, which must be observed throughout the country. We must also remain cognisant of the fact that a sustainable and clean energy transition must be underpinned by economic justice.

Therefore, it is up to this convention to place back the just in our discussions with regards to energy provision and distribution. In reality, electricity and energy have become a right in themselves, for it can influence the level of access citizens have to the other rights. This became gapingly clear during the recent Covid-19 Pandemic where the United Nations Children’s Fund (UNICEF), found that school children had lost 54% of learning time because of the pandemic and some 400 000 to 500 000 leaners had reportedly dropped out.

No doubt most of those children are those who come from poorer backgrounds, with no access to consistent electricity and ICT. Some would have had to leave school to find work, because of the loss of the main bread winner. Therefore, there can be no doubt of the relationship between electricity and development. Landing by plane at night in a more well lit up town or city tells you the level of development in that society.

Electricity significantly contributes to the improvement of human lives. In addition to its positive social effects, electricity stimulates the economy. The economic growth and development process is powered by energy. Without energy, development is impossible. Access to electricity in South Africa, as with access to other basic services such as housing, education and water is paralleled by high levels of poverty and socio-economic inequality.

We must therefore work together as part of the District Development Model to deal with the challenges we are facing and to embrace the energy revolution. Let us work together, to be customer centric and service orientated. Let us try harder to maintain the current infrastructure.

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The price of water and electricity in South Africa: A Tale of Two Tragedies

Authors: Matthew Capes, Sean Moolman

This article seeks to examine the price and affordability of water and electricity in South Africa. We embark on a tough but important journey to shed light on how the price of electricity and water has changed over the last 25 years, and how these basic needs have become less affordable for us, the citizens of South Africa.

On this journey, we discuss the following topics in 5 short chapters (click the link to go directly to a specific chapter):

  1. The increase in Eskom’s average electricity tariff vs. inflation (CPI) – click here to read
  2. The increase in the average municipal water and sanitation tariff for three different income levels vs. inflation (CPI) – click here to read
  3. The contrast between the increases in South African electricity and water tariffs vs. inflation (CPI) – click here to read
  4. How South Africans’ monthly electricity and water bills have changed in the past 25 years in both nominal and current money – click here to read
  5. The combined electricity and water bill of an average South African household vs. average household disposable income in South Africa – click here to read

Each of the above topics is accompanied by a graph to aid the discussion and illustrate the seriousness of the situation in South Africa.

We hope to highlight the pertinence of wise water usage and efficient energy consumption and to stimulate the conversation surrounding what we could and should do to ensure sustainable and affordable access to these basic needs for all South African citizens.

For methods, assumptions and references, click here.

Chapter 1. Eskom average tariff vs. inflation (CPI)

The state of South Africa’s electricity provider, Eskom, is no secret. Plagued by ageing infrastructure, mismanagement, corruption, shrinking or stagnant revenues and increasing debt, the state-owned utility is caught in what is known as a ‘death spiral’.

The impact of these issues manifests in two ways. The first is known as load-shedding, something with which we as South Africans have become all too familiar. The second is the infamous Eskom electricity tariff increases. Ideally these tariff increases would be somewhat in line with increases in inflation… Oh what a perfect world that would be!

In sunny South Africa, electricity tariffs have increased by 512% from 2007 to 2020 (see the graph). That is 5 times faster than inflation! Eishkom?

To top it all off, Eskom was recently granted a R13 billion clawback by NERSA, as well as an additional R69 billion clawback, resulting from a court judgement in Eskom’s favour[a].

What does that mean for us? We, the citizens of South Africa, are set to experience further rapid electricity bill escalations over the next few years. It goes without saying that those increases will not be accompanied by improved service delivery.

Speaking of rapid escalations, has anyone kept an eye on their water bill? In the next chapter we take a closer look at municipal water tariffs.

Chapter 2. Average municipal water & sanitation tariff vs. inflation (CPI)

In the previous chapter we discussed the 512% increase in the average Eskom electricity tariff since 2007. We shall now embark on the 2nd leg of our journey in which we highlight an equally odious development in a tariff that has received a lot less negative press: Water and sanitation.

You are not alone if you allowed the increasing cost of your most basic need to go unnoticed…

Perhaps now is the time to explore the real water tariff trends, overshadowed by Eskom’s conspicuous plight and camouflaged by a complicated tariff structure, but which impacts our daily lives as South African citizens. Think back to ‘Day Zero’ in 2018 and the questions surrounding a lack of access to water and water insecurity in South Africa.

Now ask yourself this: Is it possible that the cost of the water provided by municipalities has increased faster than inflation, considering the deteriorating service delivery on a broader scale?

As can be seen in the graph, average municipal water tariffs have increased four times faster than inflation since 1996.

Essentially, the average municipal water tariff was almost 1300% higher in 2020 than in 1996… Unfortunately, we must bear this burden together with that of Eskom’s runaway tariffs.

In the next chapter, we compare electricity and water & sanitation tariffs over the past 25 years and consider why the increases in average municipal water tariffs have gone largely unnoticed.

Chapter 3. South African electricity and water tariffs vs. inflation (CPI)

In the previous chapter, we highlighted the dizzying increases in average municipal water tariffs since 1996.  The numbers are startling to say the least, which begs us to ask: how could such exorbitant increases happen right under our noses without a public outcry?

The bulk of negative public attention and sentiment has been aimed at Eskom… Rightfully so, however, it may have distracted us from an equally pressing issue.

Water tariffs (1270%) have increased even faster than electricity tariffs (1120%) over the past 25 years (1996 to 2020).

But we have an excuse for our ignorance, for these staggering municipal water tariff increases are cloaked by more than Eskom’s shadow.

To begin with, our water tariffs appear as only one component in a larger municipal bill and are thus hidden in the details. Furthermore, every municipality sets its own water tariffs and structures them in a more complicated way than residential electricity tariffs. This tariff structure is known as block tariffs, where the price per unit of water increases in blocks as usage increases.

Consequently, it is more difficult for people to make direct comparisons and to know the real cost of each unit of water.

Our journey to unearth the truth would be incomplete without investigating the real monetary impact of these increases. How has the price of water and electricity changed over the past 25 years in current money terms? In the next chapter, we illustrate and discuss how these increases have affected our monthly electricity and water bills in both nominal and current money.

Chapter 4. South African monthly electricity and water bills 1996 to 2021 (nominal and current money)

Electricity and water tariff trends in South Africa were explored in the previous articles in this series. But this would be rather meaningless without highlighting how this translates into the monthly electricity and water bills of the average South African.

What was the monthly water and electricity bill 25 years ago compared to what we are paying today?

Not accounting for inflation, the average monthly electricity and water bill for lower to middle income families was a mere total of R161 in 1996. Fast forward to 2020 and this average monthly electricity and water bill has ballooned to R2 028!

The question you should now be asking is: “how much of that increase was due to inflation”?

As I am sure you would have guessed, the answer is not much. The next graph tells the story.

Essentially, this graph tells us that in 1996 the average electricity and water bill was R638 in today’s money.  A stark contrast to the R2 028 average monthly electricity and water bill in 2020.

These prices have been adjusted for inflation and so the increases seen in the above graph are entirely the result of above-inflation tariff increases implemented by Eskom and local municipalities.

An over-arching question remains:  Can we afford these exponential increases in the cost of two of our most basic needs?

We will answer this important question in the final leg of our journey, in which we compare the average electricity and water bills to the average household disposable income in South Africa over the past 25 years.

Chapter 5. Electricity & water bill vs average household disposable income in South Africa

The final leg of our journey is arguably the most pertinent. We know for certain that inflation is not the major cause of the increases in electricity and water tariffs. But the real question is: Can we afford these spiralling electricity and water bills? Did South Africans’ average income keep pace?

Looking at the above graph, the conclusion must be a deafening no. While our average monthly electricity and water bills have increased by 200% since 1996, our average household disposable income[b] has increased by a mere 37% since 1996.

The divergence between these basic costs and household income is especially pronounced from 2008 onward (the past 12 years). Furthermore, our disposable income has been impacted by economic downturns and, more recently, rising income tax rates.

Two of our basic needs have become increasingly unaffordable and we continue to struggle with load-shedding. Now more than ever, we need to take practical steps to explore alternative solutions.

Although the current outlook is bleak, there is hope on the horizon. In October 2020, the Department of Mineral Resources and Energy gazetted amendments to the electricity regulations, allowing municipalities to generate and procure their own electricity. South Africa has some of the best solar PV and wind resources in the world and the cost of these options continues to fall, making self-generation as well as the renewable aspirations of the Integrated Resource Plan (IRP) more viable every day.


Appendix A. Methods & assumptions

  • Average electricity consumption data for different LSM (Living Standards Measure) categories was obtained from Reference [1]. LSM 1 to 4 were classified as low income, LSM 5-6 were classified as lower to middle income and LSM 7-10 were classified as middle to upper income.
  • Average water consumption data for low, middle & high income households was obtained from References [2] and [3]. It was assumed that water consumption remained constant over time, although it is possible that it has reduced somewhat over the years due to increasing prices and water restrictions. However, the data in the references used ranged from 2004 to 2015 and water consumption was relatively constant over this period.
  • Eskom electricity tariff data were obtained from its website [4].
  • The Consumer Price Index (CPI) was used as inflation measure. CPI data was obtained from References [5][6] and [7].
  • Municipal electricity and water & sanitation tariff data for the four metropolitan municipalities Cape Town, Johannesburg, Tshwane and eThekwini were obtained from their respective websites [8][9][10] and [11], as well as third-party reports [12].
  • Where water restrictions were in place and water restriction levels changed during the course of a municipal year (such as in Tshwane or Cape Town), the tariffs for the water restriction level that was in place for most of the year was used to calculate the average tariffs for the different income levels.
  • Tariffs for all income group were calculated based on the ‘single dwelling houses’ category and not for apartment buildings.
  • ‘Indigent’ tariffs were not applied in calculation of the average tariffs for the lower income group (in other words, this group is not representative of the ‘lowest’ income group, but rather the ‘lower’ income group).
  • All tariffs are VAT inclusive.
  • All tariffs are metered tariffs (as opposed to prepaid tariffs). However, for most municipalities and in most years metered & prepaid tariffs are structured the same.
  • For the period 1996 to 2002, the water tariff data obtained excluded sanitation tariffs. The sanitation tariffs for this period for each of the four metro municipalities (Cape Town, Johannesburg, Tshwane and eThekwini) were estimated using the respective municipality’s average sanitation tariff as % of total water & sanitation tariff for later years for which full data was available.
  • Disposable income data was obtained from Reference [13].
  • No water & sanitation tariff data could be obtained for the four-year period 2003 to 2006. For this period, linear interpolation was done between the 2002 and 2007 tariffs for each municipality.
  • Average tariffs across the four metro municipalities in the study (Cape Town, Johannesburg, Tshwane and eThekwini) were calculated as simple averages (in other words, not weighted by measures such as population size).

Appendix B. References

[a] https://www.engineeringnews.co.za/article/eskom-says-it-needs-r23bn-more-from-tariffs-in-2021-to-remain-a-going-concern-2020-11-05

[b] ‘Disposable income’ is defined as the total income after tax (in other words before expenses), not income after expenses.

[1]. Goliger, A. and Cassim, A. (14 and 15 July 2017). Tipping Points: The Impacts of Rising Electricity Tariffs on Households and Household Electricity Demand. 3rd Annual Competition and Economic Regulation (ACER) 2017 Conference, Dar es Salaam, Tanzania. Website: http://www.competition.org.za/s/Parallel-3B_Goliger-and-Cassim_National-Treasury.pdf. Last accessed: 2017/08/21.

[2]. Viljoen N. 2015. City of Cape Town Residential Water Consumption Trend Analysis 2014/2015. Website: https://greencape.co.za/assets/Sector-files/water/Water-conservation-and-demand-management-WCDM/Viljoen-City-of-Cape-Town-residential-water-consumption-trend-analysis-2014-15-2016.pdf. Last accessed: 2020/08/02.

[3]. Bailey WR, Buckley CA. 2004. Modelling Domestic Water Tariffs. Proceedings of the 2004 Water Institute of Southern Africa (WISA) Biennial Conference. Cape Town, South Africa, 2-6 May 2004. Website: https://wisa.org.za/wp-content/uploads/2018/12/WISA2004-P004.pdf. Last accessed 2020/08/02.

[4]. Eskom Tariff History. Website: http://www.eskom.co.za/CustomerCare/TariffsAndCharges/Pages/Tariff_History.aspx. Last accessed: 2020/08/04.

[5]. Focus Economics. Inflation in South Africa. Website: https://www.focus-economics.com/country-indicator/south-africa/inflation. Last accessed: 2020/08/04.

[6]. Bureau for Economic Research. Inflation Expectations. Website: https://www.ber.ac.za/BER%20Documents/Inflation-Expectations/?doctypeid=1065. Last accessed: 2020/08/04.

[7]. Statistics South Africa. CPI headline inflation history. Website: http://www.statssa.gov.za/publications/P0141/CPIHistory.pdf?. Last accessed: 2020/08/04.

[8]. City of Cape Town Tariffs. Web pages:

https://www.capetown.gov.za/Family%20and%20home/residential-utility-services/residential-water-and-sanitation-services/water-and-sanitation-services-and-costs-for-formal-housing.

http://resource.capetown.gov.za/documentcentre/Documents/Forms,%20notices,%20tariffs%20and%20lists/L3-WaterSanitationRestrictionTariffs.pdf

https://resource.capetown.gov.za/cityassets/Files/Tariff_increases_from1July17.pdf

http://resource.capetown.gov.za/documentcentre/Documents/Financial%20documents/Budget%202018-2019%20Annexure%206%20Tariff%20Fees%20and%20Charges%20Book.pdf

https://www.capetown.gov.za/Family%20and%20home/Residential-utility-services/Residential-electricity-services/the-cost-of-electricity

[9]. City of Johannesburg Tariffs. Web pages:

https://www.joburg.org.za/services_/tariffs/Documents/annexure%2020.pdf

https://www.joburg.org.za/Campaigns/Documents/2014%20Documents/2014-15%20approved%20tariffs.pdf

https://www.joburg.org.za/services_/tariffs/Documents/2015-16%20tariffs%20for%20approval.pdf

https://www.joburg.org.za/services_/Documents/rates%20and%20taxes/201617%20APPROVED%20TARIFFS%20FOR%20GAZETTING.pdf

https://www.joburg.org.za/documents_/Documents/Other/traffifs/Approved%20tarrifs.compressed.pdf

https://www.joburg.org.za/services_/Documents/rates%20and%20taxes/2018-19%20APPROVED%20TARIFFS%20FOR%20COJ.pdf

https://www.joburg.org.za/documents_/Pages/Key%20Documents/other/links/tariffs/Tariffs.aspx

[10]. City of Tshwane Tariffs. Web pages:

http://www.tshwane.gov.za/sites/Departments/Financial-Services/Financial-Documents/Pages/Promulgated-Tariffs.aspx

http://www.tshwane.gov.za/sites/Departments/Financial-Services/Financial-Documents/Miscellaneous/Statistics%20and%20Tariff%20Handbook%202012.pdf

http://www.tshwane.gov.za/sites/Departments/Financial-Services/Financial-Documents/Miscellaneous/Statistics%20and%20Tariff%20Handbook%20June%202014.pdf

http://www.tshwane.gov.za/sites/Departments/Financial-Services/Financial-Documents/Pages/Miscellaneous-Documents.aspx

[11]. eThekwini Tariffs. Web pages:

http://www.durban.gov.za/City_Services/water_sanitation/Bylaws_Tariffs/Tariffs/Pages/Sewage_Tariffs.aspx

http://www.durban.gov.za/Resource_Centre/Services_Tariffs/Water%20Tariffs/Forms/AllItems.aspx

http://www.durban.gov.za/City_Services/electricity/Tariffs/Pages/default.aspx

[12]. Third-party websites used as sources for municipal electricity, water & sanitation data:

http://www.rrva.net/wp-content/uploads/2011/09/New-Tariffs-and-Rates-for-CoJ-2011-12.pdf

https://www.timeslive.co.za/news/south-africa/2018-05-10-cape-town-explains-water-tariffs-pipe-network-costs-more-than-water/

[13]. South African Reserve Bank data. Website links:

https://www.resbank.co.za/Publications/Detail-Item-View/Pages/Publications.aspx?sarbweb=3b6aa07d-92ab-441f-b7bf-bb7dfb1bedb4&sarblist=21b5222e-7125-4e55-bb65-56fd3333371e&sarbitem=10091

https://www.resbank.co.za/Lists/News%20and%20Publications/Attachments/10091/14Statistical%20tables%20%E2%80%93%20Key

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The Water Africa show updated conference agenda

Nov 308:30Conference pass

The dawn of the digital water utility

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The Water Show Africa 2020 is going Virtual!

After much consideration and in the interest of your safety, we are excited to announce that The Water Show Africa is going virtual.

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We’re going Virtual!

After much consideration and in the interest of your safety, we are excited to announce that Power & Electricity World Africa and The Solar Show Africa 2020 going virtual.

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